Congress Is Making Life Harder for Economics

Princeton University’s Angus Deaton, who this week won the Nobel Prize in economics, spent much of his career doing the painstaking work of improving economic data. Data is the lifeblood of economics -- it’s how we know the difference between wrong theories and right ones. Scientists conduct experiments; economists gather data and do statistical analysis on it. Without data, economics isn't very scientific at all.

So it’s very bad news that our legislators are gutting funding for the Bureau of Labor Statistics.

The BLS is one of the most important economic data-gathering agencies in the U.S. Employment numbers? Inflation statistics? Those all come from surveys run by the BLS.

Unfortunately, the Republican-controlled Congress is allowing the bureau to wither on the vine, and there are signs it will get worse. During the past five years, funding has stagnated as inflation has risen, meaning that in real terms the agency’s budget has fallen by 10 percent. Now the Senate is proposing to cut funding by about 4 percent more, in real terms, this year.

This is a dangerous game. The rewards from cutting BLS funding are minuscule. The proposed cut will save only $13 million a year, or about 0.002 percent of the federal discretionary budget. For comparison, this is about equivalent to the average household saving roughly $1 a year. It is nothing, nada. Not even a drop in the bucket.

But these tiny funding cuts are already having a huge effect on the agency’s ability to tell us what’s going on with the economy. In 2014, the BLS was forced to cut back on one of its major programs, the Quarterly Census of Employment and Wages. It almost had to slash another program that gathers data on imports and exports.

Cutting these and other BLS surveys would be like blinding ourselves intentionally. It is because of BLS programs that we know whether the economy is stagnant or recovering, whether the trade deficit is shrinking or growing, whether Americans are getting jobs or losing them. Respected empirical economists Katharine Abraham, Steven Davis and John Haltiwanger explain the negative consequences that could result:

Cost-of-living adjustments for Social Security, Disability Insurance and federal retirement pensions depend directly on movements in the BLS Consumer Price Index, as do income tax brackets, tax exemptions and deductions, and thresholds for the Earned Income Tax Credit.

In other words, BLS data isn’t just essential for a productive, well-informed economic policy debate. It isn’t just needed to help economists develop and test better theories of why we have recessions and inflation and trade deficits. We actually need it in order to carry out basic government functions.

Why would the legislature endanger the basic mechanics of government in order to save a negligible amount of money? Maybe it's simple ignorance -- legislators and their aides could be running down a list of government programs, slicing a little bit off of each one without really understanding what it does. Share the pain equally.

A more frightening possibility would be that our politicians just don’t think economic data is important. Data enables the administration of government programs, and many politicians think government programs in general should be cut. In the 1980s, conservatives proposed a “starve the beast” strategy, in which tax cuts would force the government to limit spending. That strategy failed. It would be very sad if the BLS cuts were part of a new strategy to “confuse the beast.”

Whatever the reason, the BLS reductions are part of two dismaying trends in our legislative priorities -- cuts to research funding, and a disregard for the importance of social science. In the case of the BLS, it would be a mistake to further hobble an agency that does so much to aid our very understanding of the economy around us.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.